A major disadvantage of the high-low method of analyzing cost behavior is:
A)It bases its solution on only two possibly extreme observations,rather than all of the data points.
B)It results in its analyzed cost being treated as either fixed or variable,based on which type of behavior it more closely resembles.
C)Two persons could draw different lines through the data points.
D)It enables non-representative points,called outliers,to be identified.

Question

Quizplus · Accepted Answer

The high-low method only uses the highest and lowest data points to determine the cost equation, which may not be representative of the majority of data points. This can result in inaccurate cost behavior analysis.

A Major Disadvantage of the High-Low Method of Analyzing Cost